IOTA Fights for Crypto Regulation That Fosters Innovation, Not Compliance Burdens

IOTA Foundation has actively engaged with U.S. policymakers to shape emerging digital asset regulations, emphasizing the need for clear utility token standards and innovation-friendly frameworks. As the U.S. moves toward structured rulemaking, IOTA has submitted feedback to key initiatives, including the Senate Banking Committee’s Responsible Financial Innovation Act and the Commodity Futures Trading Commission’s (CFTC) efforts to list spot crypto assets. The foundation advocates for distinguishing utility tokens from securities, supporting decentralized finance (DeFi), and fostering inter-agency coordination to reduce regulatory uncertainty.

In its response to the Senate’s Request for Information (RFI), IOTA outlined five priorities to guide U.S. digital asset markets. These include rejecting a one-size-fits-all approach to token classification, allowing yield-bearing stablecoins with robust disclosures, exempting non-custodial DeFi systems from intermediary regulations, embedding innovation as an SEC mission, and formalizing coordination between the SEC and CFTC. The foundation stresses that utility tokens, which provide network access or functionality, should not be conflated with traditional securities, which are subject to stringent financial regulations.

IOTA’s feedback to the CFTC focused on five principles for spot crypto listings. It called for a joint SEC-CFTC methodology to classify commodities and securities, proportionate standards aligned with decentralized networks’ realities, on-chain transparency tools for market oversight, and simplified listing processes to avoid gatekeeping smaller innovators. The foundation also emphasized public guidance and templates to build trust in the listing process.

The U.S. regulatory landscape is evolving alongside the European Union’s Markets in Crypto-Assets Regulation (MiCA), which took effect in July 2023. While both frameworks aim to reduce systemic risks and promote transparency, they differ in scope. The U.S. GENIUS Act focuses on payment stablecoins and federal oversight, while MiCA prioritizes EU-wide harmonization and licensing for crypto-asset service providers. IOTA highlights that MiCA’s detailed technical standards, though providing clarity, risk becoming overly complex for compliance, whereas the U.S. model centralizes oversight but leaves broader reforms to future debates.

A parallel effort by the CFTC Global Markets Advisory Committee’s Digital Asset Markets Subcommittee has advanced the definition of utility tokens as commodities. The working group proposed a six-element framework to determine if a token qualifies for the CFTC’s jurisdiction, including immediate consumptive use, governance rights, and future access to products or services. It also recommended a self-certification process for tokens, publication of an approved utility token list, and formal consultation between the CFTC and SEC to address jurisdictional overlaps.

IOTA’s advocacy underscores the importance of proportionality in regulation. The foundation argues that excessive compliance burdens could stifle innovation, particularly for smaller projects, while fragmented enforcement actions have already cost U.S. companies over $400 million in litigation. By promoting clear definitions and safe harbors, IOTA aims to ensure that regulatory frameworks balance market integrity with technological progress.

As the U.S. and EU models coexist, IOTA emphasizes the need for adaptable, globally compatible standards. The foundation will continue engaging with policymakers to refine frameworks that are balanced, future-proof, and supportive of responsible innovation. With the CLARITY Act and other reforms pending, the coming months may define the trajectory of digital asset regulation in the U.S. and its impact on global markets.

Source: [1] title3 (https://iota-news.com/how-iota-is-responding-to-a-new-era-for-u-s-digital-asset-policy/) [2] title4 (https://blog.coinfund.io/signs-of-progress-working-to-define-the-utility-token-as-a-commodity-f07d27cf60a3)